Washington, September 17, 2025 — The U.S. Federal Reserve announced a 25-basis-point cut to the federal funds rate target range, lowering it to 4.75%–5.00%. This marks the first rate reduction of the year and aligns with broad market expectations. The move signals a policy shift after a prolonged period of high interest rates aimed at curbing inflation. Beyond supporting U.S. economic growth, the decision is prompting global markets and investors to reassess capital flows and asset allocation strategies.

Inflation Eases, Job Growth Slows

In its statement, the Fed highlighted that U.S. consumer prices rose 2.5% year-on-year in August, a sharp drop from the 9%-plus peak in 2022. Core CPI increased 2.8% from a year earlier, edging closer to the Fed’s long-term 2% target. Meanwhile, the unemployment rate rose slightly to 4.2% in August, the highest level in nearly two years, reflecting weaker job growth. At the post-meeting press conference, Chair Jerome Powell stressed that the rate cut aims to “balance economic growth and price stability,” while reaffirming that future policy will remain data-dependent.

Markets Respond Positively

The rate cut triggered gains across U.S. equities. The Dow Jones Industrial Average rose 0.9%, the S&P 500 climbed 1.1%, and the Nasdaq jumped 1.4%. U.S. Treasury yields fell sharply, with the 10-year yield dropping about 12 basis points to 4.05%, the lowest in two months. The U.S. dollar index slid nearly 0.6%, marking its steepest daily drop in four weeks, as demand for dollar-denominated safe-haven assets eased.In Asia, the Fed’s move provided a lift to regional markets. On the morning of September 18, Hong Kong’s Hang Seng Index opened 0.8% higher, while China’s Shanghai Composite gained 0.6%, led by strength in technology stocks. The Chinese yuan appreciated about 200 basis points against the dollar to around 7.12, reflecting an easing in capital outflow pressures. Analysts noted that the Fed’s rate cut could help alleviate capital flight risks in emerging markets and improve regional liquidity conditions. However, rising oil prices and ongoing geopolitical tensions remain potential headwinds.